Nfc Awards In Pakistan Economics Essay

Nfc Awards In Pakistan Economics Essay Pakistan is a federation consisting of four provinces, federally administered tribal areas, northern areas and Islamabad Capital Territory. Pakistan is a federation but its government is highly centralized, so majority of the revenues are collected at the center and then re-distributed vertically between federal and provincial governments, and horizontally among provinces through National finance Commission (NFC) awards. Then the provinces further re-distribute the resources to local governments through a revenue-sharing formula framed by Provincial Finance Commission (PFC). The criteria of revenue sharing has always been a bone of contention between the federation and the provinces. This is mainly because the federal government keeps a larger part of the revenues to themselves while provinces are left with fewer resources to carry on their development activities, thats why they face budget deficits very frequently. Moreover, there is a little autonomy and capacity for provinces to c ollect taxes on their own, so mainly they have to rely on the revenues relocated to them by the Federal government through NFC awards. The share provinces get from the Federal government is not sufficient to carry on the development projects, which is the reason they get into budget deficits very frequently. For proper service and delivery there is need of a higher share for provinces in NFC awards. Systematic Resources transfers among governments occurs at 4 levels. Firstly, from federal governments to provincial governments through National Finance Commission (NFC). Secondly, from provincial governments to local governments through Provincial Finance Commission (PFC). Thirdly, from federal to local, and lastly from local to local. In this report, I will focus mainly on systematic resource transfers from Federal to Provincial governments through National Finance Commission awards. National Finance Commission is constituted under Article 160(1) of the 1973 constitution for the smooth and thoughtful revenue transfers between Federal and Provincial governments. Constitutionally, it is to be held every 5 years by the President of Pakistan to review the resource sharing mechanism for the equitable fiscal transfers between Central and Provincial governments. Certain taxes collected from provinces are added in the distribution pool and then re-distributed to provinces according to the revenue sharing formula. NFC decides what percentage of the total revenues will be retained by the Federal government and what share will go to the provinces. What taxes to include in the distribution pool has always been a question of debate. The chairman of the commission is the Federal Finance Minister, and its members include all provincial finance ministers and experts to be nominated by the president of Pakistan in consultation with the provincial governors. The main charter of NFC is concerned with the following matters. Distribution of specified taxes and duties between the federation and the provinces. Payment of financial grants to provincial governments. Borrowing power exercised by the Federal and Provincial governments. Any other financial matter referred to the commission. As per law, NFC was supposed to be constituted for smooth and equitable revenue transfers between the Federal government and provinces. But in reality, it faced difficulties which hindered its development. Only 7 NFC awards have been given up till now, of which 3 were conclusive. The rest 4 remained inconclusive because federal government and provinces couldnt reach an agreement on the distribution criteria of revenues, therefore an interim award was awarded by the President in this situation. This paper will evaluate all the NFC awards in the history of Pakistan. Its related issues will be highlighted and improvements in the resource transfer mechanism will be recommended. 2. THE EVOLUTION OF NFC AWARDS 2.1 PRE-INDEPENDENCE REVENUE SHARING (NIEMEYER AWARD) Before independence of Pakistan, Niemeyer Award was followed in British India for the distribution of revenues between the Federal government and provinces, under the Government of India Act, 1935. All the financial matters between Federal and provincial governments were ruled by this act. Under this award, sales tax was a provincial subject, and 50 percent of the income tax collections were subjected to be redistribute. Even after the independence, Niemeyer award was followed till March 1952 with some adjustment in railway budget, sharing of income and sales tax. 2.2 POST-INDEPENDENCE REVENUE SHARING (RAISMAN AWARD) After the independence of Pakistan, Sir Jeremy Raisman was asked to devise a revenue sharing mechanism for allocation of revenues between federal and provincial governments. Thus he formed a revenue sharing formula called Raisman award in 1952. Considering the poor financial condition of the newly born state, a 50 percent share of sales tax was given to the federal government. Out of incomes of 50 percent income tax, 45 percent was given to East Pakistan, while the rest of the portion was given to the West Pakistan. 2.3 REVENUE SHARING UNDER ONE UNIT During 1955, Sindh, Punjab, Baluchistan and Khyber Pakhtunkhwa were professed as one unit- The West Pakistan. East Pakistan and West Pakistan were declared as the two separate units. The two awards, of 1961 and 1964, distributed the revenue between East Pakistan and West Pakistan. 2.3.1 The 1961 Award In this award, the share of East Pakistan from divisible pool was decided to be 64 percent, while that of West Pakistan was 46 percent. 30 percent of the sales tax was relocated to provinces on the basis of their respective collection. While the remaining duties on agricultural land and capital value tax on immovable property were given to the units as per their collection. 2.3.2 The 1964 Award Under this award, the divisible pool consisted of sales tax, income tax, export duty and excise duty. 30 percent of the sales tax were relocated to each province according to its collection. The share of center and provinces from the divisible pool was decided to be 35 percent and 65 percent respectively. While the share of East Pakistan and West Pakistan remained the same as in previous award i.e. 64 percent and 46 percent respectively. 2.3.3 National Finance Committee 1970 A committee was formed instead of a commission in April 1970 to devise a formula for revenue sharing between federation and the federating units. The divisible pool remained unchanged, though the federal and provincial governments share in the divisible pool was declared as 20:80 respectively. 54 percent of the provincial share was given to East Pakistan, while the rest 46 percent went to West Pakistan. The distribution among the provinces of West Pakistan was: Punjab 56.5 percent, Sindh 23.5 percent, Khyber Pakhtunkhwa 15.5 percent, and Baluchistan 4.5 percent. After the separation of East Pakistan, their revenue share was transferred to the provinces of West Pakistan. The revenue proportion remained the same, but the size of the pie was changed. NATIONAL FINANCE COMMISSION 1973 The 1973 constitution made mandatory for the government of Pakistan to make a National Finance Commission every 5 years for fair revenue distribution between Federal government and the provinces. From that point of time, West Pakistan started its journey after the separation of East Pakistan. From 1974 onwards, all the awards have been given under the National finance Commission. In reality, NFC has not been constituted every 5 years, contrary to what the law demanded. Lets briefly go through the various NFC awards in the history. First NFC Award 1974 After an increase in the number and amount of taxes between 1951 and 1970, there was a contraction in both in 1974, reducing the size of the divisible pool. The divisible pool only included income tax, sales tax, and export duty. The distribution ratio between federal government and provinces remained the same as 20:80 respectively. The criteria for horizontal distribution among provinces was decided to be population. Punjab, being the biggest in population, was advantaged. Its share was increased from 56.50 percent to 60.25 percent. While the other three provinces suffered, Sindh suffering the most. The resource distribution among provinces is presented in the table below. Table 1 1974 NFC Award-Provincial share Punjab Sindh Khyber Pakhtunkhwa Baluchistan 60.25% 22.50% 13.39% 3.86% To combat the weak fiscal position of the provinces, Baluchistan and Khyber Pakhtunkhwa were granted aid of Rs.50 million and Rs.100 million respectively. Second NFC Award 1979 The second NFC was constituted by the President general Zia-ul-Haq in 1979. But it held no meetings, consequently no award was given. Therefore, the award of 1974 was followed as an interim award. After census was held in 1981, the population ratios changed and so did the provincial share in NFC awards. The provincial share was adjusted according to the new census, which led some improved conditions in Baluchistan and Sindh, whereas the share of Khyber Pakhtunkhwa remained unchanged. The new provincial resource distribution according to the changed population is illustrated in the given table. Table 2 1979 NFC Award- Provincial Share Punjab Sindh Khyber Pakhtunkhwa Baluchistan 57.97% 23.34% 13.39% 5.30% Third NFC Award 1985 The third NFC was also constituted in Zia-ul-Haq regime in 1985. It held nine meetings in 3 years but failed to produce any fruitful results, mainly due to political instability. So the award of 1974 was followed till 1990. Fourth NFC Award 1991 After a long time, NFC became successful in giving recommendation in 1991. NFC is supposed to announce an award every 5 years, but there was a gap of 17 years between the previous award of 1974 and the 1991 award. This award came with some improvements and expansion in the divisible pool. Central excise on tea, tobacco, and betel nut was added in the divisible pool. So the divisible pool consisted of income tax, sales tax, export duty, and excise duty. However, custom duty still remained with Federal government. Federal government also took the responsibility of financing the provinces in case of deficits. The Federal and provincial share remained to be at 20 percent and 80 percent respectively. It can be said that the 1991 award was so far the best deal for provinces. But this award could not make any development regarding the diversification in the revenue sharing mechanism. The sole criteria for revenue sharing among provinces remained to be population. Disagreements among provinc es hindered the development in the resource sharing criteria. However, if we look at the positive side, this award considerably expanded the volume of provincial share in the revenues collected by the Federal government by around 18 percent as compared to 1974 award. This was mainly due to the addition of excise duty on certain items in the divisible pool. The 1991 award was a step forward to fiscal decentralization and provincial autonomy in the country. The 1973 constitution acknowledged the right of provinces to get royalty on natural resources on the basis of collection by each province. Royalty on gas and crude oil, development surcharge on gas, and profits from hydro-electricity were relocated to provinces in the form of straight transfers. As a result, the transfers to provinces increased from 28 percent (Rs. 39 billions) to 45 percent (Rs. 64 billion) of federal tax revenue. The share of each province under this award is given in the table below. Table 3 1991 NFC Award-Provincial Share Punjab Sindh Khyber Pakhtunkhwa Baluchistan 57.88% 23.28% 13.54% 5.30% Provincial share didnt have any changes because population was still the sole criteria for revenue distribution and no census was held since 1981. However, the volume of provincial share increased due to the inclusion of new taxes in the divisible pool. In addition to this, special grants were also provided to provinces to meet their developmental needs. The amount of these grants is illustrated in table 4. Table 4 1991 NFC Award-Provincial Grants Amount/Years Punjab Sindh Khyber Pakhtunkhwa Baluchistan Amount 1000 700 200 100 Next Years 3 5 3 3 (Rs.in million) However there was an increase in the flow of funds to the Provincial governments, provinces were advised to generate their own funds, but the autonomy and funds generating capacity were not sufficient as needed. Fifth NFC Award 1996 The 5th NFC award was announced in late 1996 by the care-taker government of that time. This award included all the federal taxes in the divisible pool. Which comprise: income tax, sales tax, capital value tax, wealth tax, excise duties (except the excise duty on gas charged at wellhead) and any other tax collected by federal government. Royalty on crude oil and development surcharge on gas were also relocated to provinces in the form of straight transfers. The incentive of matching grants was also given to the provinces but up to a certain limit; only if provinces exceeded their revenue target of 14.2 percent they would get matching grants. However, numerous objections have been made by the members of parliament elected to the provincial and federal governments following the 1997 general elections. With the expansion of federal divisible pool, the federal-provincial ratio in this award changed radically. Earlier it was 20 percent for federal government and 80 percent for provinces. In this award, the ratios were changed to 62.5 percent for federal government and 37.5 percent for provinces. One reason for decreasing the provincial share in the divisible pool is the overestimation of GDP growth rate. During the period when this award was being exercised, the country faced internal and external upsets which negatively affected the economy. Some say that provinces would be in a better financial situation if previous award of 1991 award was continued to follow that time. The sole criteria for resource distribution continued to be population. No development was made in this area. Considering the miserable situation of Baluchistan and Khyber Pakhtunkhwa, special grants of 4 and 3.3 and billions rupees were awarded to them respectively for the next 5 years. Sixth NFC Award 2000 The 6th NFC was constituted in year 2000 by the President General Pervez Musharraf. It held 11 meetings but could reach to any conclusions due to disagreements among the members of NFC. Provinces were demanding a share up to 50 percent, as well as diversification in the resource distribution criteria. Another NFC was constituted on 21st July, 2005 during President Musharrafs regime. But it too, like the previous NFC, stuck in a deadlock among its members and failed to give any recommendations due to the conflicting demands of its members. After an unsuccessful attempt to generate consensus on the resource distribution mechanism, all the provincial Chief Ministers asked the President to give a fair and justified award which would be acceptable to all stakeholders. So General Musharraf amended the Distribution of Revenues and Grants-in-Aid Order, 1997 by issuing Ordinance No. 1 of 2006. Thus after a deferral of 6 years, the 1997 award was amended and came into force on 1st July, 2006. Under this award, due to the constant demand from provinces, the provincial share from the divisible pool increase to 45 percent (share in total divisible pool + grants), with gradual increase of 1 percent every year up till the next 5 years. All the taxes of 1996 award were included in the divisible pool. The grants to provinces were increased from Rs.8.7 billion to Rs.27.75 billion. Punjab and Sindh, which didnt receive any grant in the 1997 award, were also given grants of Rs.3.05 billion and Rs.5.83 billion respectively. Seventh NFC Award 2010 The most recent NFC award of 2010 was given in the present democratic government. 2010 NFC award is a milestone in the history of Pakistan, which has bring improvements and variation in the resource distribution criteria. The demands of Sindh, Baluchistan and KPK have been recognized. The most prominent and distinguishing feature of this award is that it has followed a multi-dimensional revenue distribution criteria. In addition to population, other parameters have also been included, such as poverty, underdevelopment, and inverse population density criteria, as demanded by Sindh, KPK and Baluchistan. Baluchistan being the largest in area and scattered in population, demanded the criteria of inverse population density to include in the revenue sharing formula. While Punjab wanted population to remain the only criteria because it is in the provinces advantage. Since 1973 constitution, it is for the first time that resources are not distributed among provinces according to the old popu lation standards, but an advancement has been made in the resource sharing criteria. The formulation of multiple criteria for resource distribution is a commendable step and a way further to fiscal autonomy of provinces. It has been measured as a success of democratic system and provincial partners. Economists have measured it groundwork for Fiscal Federalism in Pakistan. No disputes came in the way of approval of 7th NFC award. It is marked by sacrifices and compromises by all the stakeholders for the sake of national unity and development. The big provinces exhibited flexibility in their approach to accommodate the demands of smaller and backward provinces. The center has sacrificed more than 10 percent of its share for provinces i.e. about Rs.225 billion more were granted to provinces during FY 2011-12 budget [Pakistan Economic Survey (2011)]. All the stakeholders have decided to cut the cost of revenue collection to 1 percent (previously it was 5 percent) to increase the flow of real transfers to provinces. Resultantly, the provincial share from the divisible poo l increased from 47.5 percent to 56 percent in the first year and 57.5 percent for all the remaining years of the award. This award is also significant in a way that all the provinces and center have shown a considerate behavior towards the most backward province Baluchistan. Acknowledging its special development needs, all the stakeholders have agreed to provided Baluchistan Rs.83 billion (9.09 percent) of the provincial pool in the first year of the Award. Punjab has given up 1.27 percent, Sindh 0.39 percent, and KPK 0.26 percent of its share. Whereas Baluchistan has gained 1.82 percent. The federal government has given up more than 10 percent of its share for provinces, which has increased the flow of revenues to provinces. The number one beneficiary of this award is Baluchistan with an additional budget of 175 percent. While KPK, the second most benefitted, received 79 percent, Sindh 61 percent, and Punjab 48 percent additional budget. The resource distribution among provinces is illustrated in table 5. Table 5 NFC Award 2010- Resource Distribution Province % Share in Divisible Pool under 7th NFC % Change in Share Additional Budget % Punjab 51.74 1.27 48 Sindh 24.55 0.39 61 KPK 14.62 0.26 79 Baluchistan 9.09 +1.82 175 Source: Pakistan Economic Review (2010) If we talk about the distribution parameters, 82 percent weightage has been allocated to population, 10.3 percent to poverty, 5 percent to revenue generation/collection, and 2.7 percent to inverse population density. Table 6 illustrates the different parameters and its weightage against each province. Table 6 NFC Award 2010-Revenue Sharing Formula (in percentage) Parameters Weight Punjab Sindh KPK Baluchistan Population 82 57.36 23.71 5.11 13.82 Poverty/backwardness 10.30 23.16 23.41 25.61 27.82 Revenue Collection 5 44.0 50 1.0 5 Inverse Population 2.7 4.34 7.21 81.92 6.54 One of the greatest achievements regarding this award is that it has aimed to reduce disparities among the provinces. This award benefits the two relatively more backward provinces, Khyber Pakhtunkhwa and Baluchistan, as compared to Sindh and Punjab. Before this award, provinces were getting Rs.550 billion. But in the first year of enforcement of this award provinces got more than Rs.850 billion, and in the next 5 years this amount will increase up to 1250 billion. The greatest achievement of this award is the reduction in inequalities regarding revenue collection in Sindh and Punjab, gas development surcharge from Baluchistan, and hydel profits from KPK. Considering the role of Khyber Pakhtun Khwa in war against terrorism, it has been provided a share of 1 percent from the divisible pool. 4. DEVELOPMENT OF NFC AWARDS OVER TIME Financial resources play the fundamental role in the development of any country. A well thought-out resource distribution is necessary for the development of backward areas so they can be at par with the national growth and progress. The current state of revenue distribution in Pakistan has evolved over time. Various improvements and advancements have been made in the revenue sharing formula since the formation of National Finance Commission. In this section I will analyze the impact of various NFC awards on the fiscal decentralization of the country. In Pakistan fiscal federalism has always been an issue which has never received a serious approach. Out of Seven NFC awards, only four have come up with additional parameters of revenue sharing between the federation and its units. Federal government has taken a less systematic approach to decentralize fiscal powers and functions and made the provinces depend on the center. This has negatively affected the performance and efficiency of provinces to work effectively. In a federation, the basic functions of Central government are maintaining law and order, defense matters, making a sound foreign policy, communications, currency management, general administration, debt servicing, industrial development, and work on public welfare including health and education. The rest of the matters fall within the sphere of Provincial and local governments. But not much effort has been put by our politicians to devolve powers and functions to lower tiers of government. With the passage of time, federal government has over-stretched itself into such matters which are of purely provincial nature, like irrigation, construction of roads, agricultural development, culture and tourism, youth affairs, and rural development. This has increased financial and administrative burden on the center. Federal government has taken too much responsibilities on its shoulders which certainly require more finance. If government is aiming toward devolution of power from center to provincial and local level, these tiers of government must be empowered and enabled to generate their own finance. Federal government generates 93 percent of the resources, while its share in the total expenditure makes up only 72 percent. On the other side, the total expenditure of provinces is 28 percent, and they generate merely 7 percent of the resources. It results in heavy dependency on the center. The argument behind the higher collection by the federation is based on the achievement of equity, efficiency, economy, and the federal governments ability to levy and collect [Kardar (2006)]. As most of the resources are already used up by the Federal government, provinces are left with less opportunities to generate their own resources. Resultantly, provinces have to rely heavily on the resources transferred to them by the center. If we closely look at the historical trend, we can easily understand that the journey of fiscal federalism In Pakistan has always been uneven. Fiscal federalism has always been a dilemma. It is interesting to note that out of seven NFC awards given after 1973 constitution, only few came up with additional parameters to share the revenues with the provinces. Only 3 out of 7 NFC awards were conclusive, the remaining 4 were inconclusive due to disagreements among the members of the commission. Historically, the problem of revenue distribution has never been taken seriously by our politicians and it always faced difficulty because consensus of all the parties involved is must for a new NFC award to be enforced. The resource distribution mechanism/criteria has always been a bone of contention among the provinces. Population, being the sole distribution criteria in all NFC awards (except the recent one) has always been a matter of friction among provinces. This shows a lack of coordination in our policy making. Sindh, Baluchistan and KPK have always demanded the diversification in revenue sharing formula with the inclusion of other factors with population, like poverty, backwardness and revenue generation capacity. Whereas Punjab has stressed over population to remain the sole criteria for revenue distribution because Punjab, being the most populated province, has always got the larger piece of pie in NFC awards. It is interesting to note that Pakistan is the only country in the world which follows one-dimensional formula for revenue distribution. Otherwise everywhere in the world various dimensions are used in view of the needs and economic conditions of the provinces. Due to inflexibility in the resource distribution formula, disparities among the economic conditions of people could not be reduced and diversified needs of provinces could not be catered as it should have been. In the above section, we have discussed each NFC award in detail, its pros and cons, and the percent allocation to provinces under each award. There are substantial disparities in the living standards amongst provinces, and also among the rural-urban areas of each province. Although the removal of discrepancies between urban and rural areas is the responsibility of Provincial Finance Commission, but without provision of adequate amount of resources/funds by the center, provinces will not be able to work on development and reducing inequalities at local level. If we compare the real per capita GDP of all the provinces, we find out that Khyber Pakhtunkhwa has been facing highest inconsistency among rural and urban income, next to Sindh and Punjab. While the gap between rural and urban income in Baluchistan is lesser, the reason is lack of development in its urban areas. Its urban areas are less developed as compared to that of other provinces, because of lesser economic opportunities i n cities. If we look at the historical trends, the first NFC award of 1947 had fewer taxes in the revenue pool. But in 1991 award, some improvements were seen in the revenue distribution. More taxes were made part of distribution pool. In addition, the right of provinces to get royalty on natural resources was given to them on the basis of collection by each province. The divisible pool was further expanded in 1996 award by the inclusion of all the federal taxes. 1996 award moved a step forward towards fiscal decentralization. It also introduced the incentive of matching grants to provinces. But if we look at the grey areas of this award, the expansion of distribution pool resulted in the contraction of provincial share. The federal-provincial share in the pool changed drastically from 20:80 to 62.5:37.5 percent respectively. So practically, no significant developments were observed in actual revenue transfers to provinces. Consequently, provinces fell short of funds and trapped in budget defi cits. Considering the miserable situation of Baluchistan and Khyber Pakhtunkhwa, special grants of 4 and 3.3 and billions rupees were awarded to them respectively for the next 5 years. Due to the constant pressure and demands from the provinces, government increased their share in the revenue pool to 45 percent in 2006 interim award. Just the provincial share was increased, no innovation was made in the resource sharing mechanism and it was still at its old population standards. Baluchistan and Khyber Pakhtun Khwa were demanding revenue distribution on the basis of poverty. The poverty ratio in Baluchistan is 37 percent and that of Khyber Pakhtunkhwa is 44 percent. However, no diversification was made in the distribution criteria. One of the main reason which hindered the development of NFC awards is the conflicting demands of provinces over the resource sharing mechanism. The criteria of revenue dispersal between the center and provinces has always been a matter of conflict between these two tiers of government. Four out of seven NFC awards remained unproductive and unsettled amid this hostility. The complaints of the provinces were heard when the central government agreed to give provinces 40 percent share in the divisible pool with addition of 1 percent every year till the next 5 years. But there is an argument from Federal governments point of view that whenever the share of provinces has increased it gave rise to non-development expenditure which is unproductive. The reason is provincial governments don not have specific development programs in place as well as capacity to raise the living standards of people. The poverty ratio in Baluchistan is 37 percent and that of Khyber Pakhtunkhwa is 44 percent, but provincial governments failed to formulate an appropriate strategy to reduce these disparities. This relates to the issue of political economy and public choice. Our electoral system can bring about such a state in which the federal government can be taken over by the larger province due to its majority seats in the National Assembly. Although, in Senate all provinces have equal representation but Senate has power only to discuss on the policy matters, but the decision making right resides with the National Assembly. So it is the National Assembly who has the constitutional supremacy to devise a reasonable resource sharing formula. Furthermore, the federal government does not want to give up its powers to provinces and let them grow autonomously as it will reduce their control on policy matters. This could be seen as since independence, 10 awards have been recommended for justified resource sharing between the center and provinces, but out of them only 3 (1974, 1991, and 2010) initiated by elected governments. The most significant development of the year 2010 was 7th NFC award which brought about some innovation in the revenue sharing criteria. After the independence of Pakistan, It was for the first time that a diversification was brought in the revenue sharing mechanism and some other factors were taken into account with population, like backwardness/ poverty, area and revenue collection. The long-ignored demands of provinces were accepted. With

Greece Crisis: Analysis, Learnings and Takeaways Essay

Greek Crisis: Background Through this write up, we are trying to explain the circumstances which led to the sovereign debt crisis in Greece. European Union was established in the year 1992 through the Maastricht treaty. The purpose of formation was to create something powerful on the lines of the USA, The United States of Europe. Also, the idea was to establish and maintain peace in the turbulent regions. In the year 1999, Euro zone was formed and a common currency, Euro, came into being. Countries set aside the currencies they each were using previously and instead dealt themselves Euros. Greece undertook the same operation. It relinquished its drachmas and received an equivalent amount of Euros. Henceforth Greek firms and Greek citizens could buy goods and services anywhere in the Euro zone with their Euros. Greece has always been an overspending economy. It’s a leisure driven economy where the government always tends to spend more than its means. This trend went to a new level when the Greek government got access to cheap and easier financing. Due to the introduction of the common currency, they could borrow as easily as a strongly backed Germany. The government previously used to monetise its deficit by printing currency. Since the choice of printing currency was no longer available due to the introduction of the monetary union, the government now resorted to borrowing lavishly to meet its deficit. The debt to GDP ratio also increased during the period. During 2004-2009, output in the Greek economy increased in nominal terms by 40%, while central government primary expenditures increased by 87% against an increase of only 31% in tax revenues. Public sector wages rose by over 50% between 1999 and 2007. Greece lived under the helm of a welfare state, with excessive spending on wages and early retirement benefits. Greek Crisis: Consequences of sub-prime Tourism and shipping are the two biggest revenue generators for the Greek economy. Both the sectors were badly hit when the sub-prime crisis wrecked global economy. There was a significant drop in the government revenue due to the shrinking of earnings from these sectors. Also, tax evasion, which was always an area of concern for the country, took full shape during this period. This led to high fiscal deficit and even higher levels of debt. In October 2009, Fitch downgraded the sovereign debt of Greece to BBB+. This lead to widening of bond yield spreads and CDS spreads. In April 2010, Greek debt was further downgraded to junk status, which effectively closed the availability of capital market financing to the country. This all was a part of a large vicious cycle. Poor ratings and excessive debt led to higher yields. Tax revenues fall due to tax evasion and GDP shrinkage. This led to higher deficit which warranted borrowing more to finance the deficit, which led to even higher cost of debt. Greek Crisis: Troika steps in The European Commission, The European Central Bank and IMF are called the troika, the three pillars on which the Greek and Euro zone hopes are resting. Amidst concerns that Greece will default on its payments and might exit the Euro zone, the troika steeped in to bail out the country. Phases of bailouts were given, based on the following measures: Austerity measures to restore fiscal balance Privatisation of government assets worth â‚ ¬50bn by the end of 2015 Structural reforms to improve growth prospects Also, debt restructuring was carried out in Greece as part of the second bailout plan. Under this, private creditors holding Greek govt. bonds were to accept lower interest rates and a 53.5% face value loss. This led to a fall in the forecasted Debt t o GDP ratio of 198% in 2012 to around 160% in the same period. The aim is to reduce the ratio to 120% by 2020. From 2012-14, troika is to cover all Greek financial needs through restructuring and bailout packages. From 2015-20, financial needs are to be met partly by capital markets and partly by privatization of govt. Assets. In May 2012, a 2 year extension was demanded till 2017 to return to self financed situation. 2 key bills were passed in the Greek Parliament pertaining to this in the last week – ‘Labour market reform’ and ‘Midterm fiscal plan 2013-16’. Should Greece leave the Euro Area? Is a fiscally-challenged country likely to want to leave the Euro Area? The brief answer is no – quite the contrary: a fiscally weak country is better off in the Euro Area than outside it. The only argument for leaving the Euro Area is that the introduction of a new national currency (New Drachma, say) would lead to an immediate sharp nominal and real depreciation of the new currency and a gain in competitiveness, which would be most welcome. It also would not last. The key rigidities in small open economies like Greece are real rigidities, not persistent Keynesian nominal rigidities, which are necessary for a depreciation or devaluation of the nominal exchange rate to have a material and durable impact on real competitiveness. Unless the balance of economic and political power is changed fundamentally, a depreciation of the nominal exchange rate would soon lead to adjustments of domestic costs and prices that would restore the old uncompetitive real equilibrium. All other arg uments either favour staying in for a fiscally weak country or are neutral. As regards the existing stock of sovereign debt, in or out makes no difference. Re-denominating the old euro-denominated debt in New Drachma would be an act of default. A country might as well stay in the Euro Area and default on the euro-denominated debt. As regards new government borrowing, issuing New Drachma denominated debt would be more costly (because an exchange risk premium would be added to the sovereign risk premium) than new borrowing using euro-denominated debt as part of the Euro Area. There would be massive balance sheet disruption for banks, other financial institutions and other corporate with large balance sheets, as the existing stock of assets and liabilities would remain euro denominated but there would no longer be a euro lender of last resort. It may be possible for contract and securities internal to Greece, that is entered into or issued under Greek jurisdiction alone, to be redenominated in New Drachma, but cross-border contracts and securities issued in other jurisdictions could not be redenominated that way without this constituting a n act of default. There would be no fiscal-financial support from other Euro Area member states should a country leave the Euro Area. Leaving the Euro Area means leaving the EU. There is no such thing as a former Euro Area member that continues as an EU member. A current EA member wishing to leave the EA but continue as an EU member would have to leave both the Euro Area and the EU and then re-apply for EU membership. Under the Lisbon Treaty, there now is a procedure for leaving the EU. A country cannot be expelled from the Euro Area, or from the EU. The only real threat of the Euro Area breaking up comes from the possibility that one or more of the fiscally strongest and more competitive members (Germany) could decide to leave the Euro Area (and the EU), because of a fear of becoming the bailer-out of first resort for all would-be fiscally-insolvent Euro Area member states. The changing of the generations in Germany from Kohl to Schrà ¶der and then to Merkel has weakened the traditional umbilical link of Germany, and especially Germany’s political class, to the EU and the Euro Area, but not (yet) to the point that one can reasonably envisage Germany leaving the Euro Area and the EU. Alternatives * Wage increase, higher inflation in Germany Wage increase in Germany would fuel inflation in Germany that will lead to increase in cost of goods sold in the economy. This would accelerate industry expansion to other territories especially like Greece, Spain. Since Greece’s main economy driver has been the tourism industry and that is also seasonal. * Common Eurobonds Instead of having separate government bonds, common Euro bonds should be issued. This would never lead to the chain reaction that was led by the Greek government bonds. * Greece or other weaker nations leaving Euro zone Greece and other weaker nations should leave Euro Zone and back to their respective currencies. This would help adjust their monetary policy with their fiscal policy. * Fiscal Integration One of the major development areas is increased European integration giving a central body increased control over the budgets of member states Key Learnings * LESSON 1: Financial markets are prone to exaggerations, which amplify further the pro-cyclicality inherent in asset valuations In times of recession, when the degree of risk aversion increases and GDP growth contracts, asset prices tend to decline and risk spreads rise. Also during this period, the standard pattern of pro-cyclicality may be amplified by market exaggerations: investors tend to over-price certain types of risk and thus under-price the respective financial assets. Exaggerated pro-cyclicality of this type has hit the sovereign bond market during the crisis. Furthermore, in particular through the use of sovereign bonds as collateral, it has exerted adverse effects on other segments of financial markets, such as the funding markets for financial institutions. There are many ways to mitigate this pro-cyclicality of government bond markets. One way is to reduce the reliance of the financial, regulatory and supervisory framework on credit ratings * LESSON 2: Fiscal Policy Union along with Monetary Policy Union is important in order to keep countries with common currency on the same page Since Euro was a common currency, Euro Currency Board took charge of the common monetary policy for the nations, but the fiscal policies differed in each country, leading to a widening gap between each country’s financial statuses. One way to curb this problem is to facilitate fiscal integration of the organizations. This would ensure that no country is not overspending and will have limited budget to workout. * LESSON 3: Welfare of the masses is not in Transfer Payments but in Investment and employment creation in the country Austerity measures would only help in curtailing the massive expenditures done on Social welfare schemes such unemployment allowances. Nations should focus on increasing the investment in the nation and looking for opportunities, where it can generate employment for its masses. This would lead to long-term economic stability in the nation. Takeaways for India * While the Indian economy needs fund flows from different sources, it should exercise special caution while depending on the overseas debt India must not allow its public debt to increase any further, especially from the external sources which may play havoc with the country’s debt situation amidst increasing volatility rupee’s foreign exchange rate * India must focus on curtailing its fiscal deficit and should be very cautious in opening up its market and allowing foreigners to invest in government securities Per capita public debt is higher than the growth in per capita income, implying that the population borrowings are increasing at a much faster pace than their earnings. Hence population is being burdened with higher amounts of public debt. Per capita income and per capita debt both have increased over the years. While per-capita income increased from Rs. 26,015 in 2005-06 to Rs. 38,005 in 2011-12 the per capita debt increased from Rs. 13,276.87 in 2005-06 to Rs. 27,044.22 in 2011-12 * Interest Payments are absorbing about one-third of Central Government’s revenue, leading to increase in non-plan expenditure. Interest payments is the fact that not only are interest payment a large contributor to the non-plan expenditure but a large part of the total revenue receipts of the Central Government are also being used to finance them and raising funds from overseas as debt at present times poses several risks, the main problem being extra burden on redemption because of lowering of the rupee value.

The Dos and Donts of Essay Topics about Power

The Do's and Don'ts of Essay Topics about Power The Benefits of Essay Topics about Power The outcome of any given influence attempt is dependent on several factors besides influencing tactics and any tactic may result in target resistance if it's not suitable for the circumstance or is employed in an unskillful method. Informal coercion rather than threats of formal sort of punishment may also be utilised to modify the behavior and attitudes and behavior of different folks. Consequently, influence is in reality a process by which an endeavor to extract compliance with the intentions from others. Therefore, political power is about not just persuasion, but in addition manipulation. It is a good idea to look for the one which has a superior reputation and offers high-quality papers at very affordable prices. Greatest college application essay service there are several reasons for picking supremeessayscom, a reliable on-line custom writing service to purchase essay. These forms of papers are excellent for honing your critical thinking skills, so over the class of your high school and college education, you'll need to compose a number of them. A shadow box is a fantastic approach to display larger dog-related items that won't match in a normal frame. Free small business plan catering. Despite the fact that this approach portion connected with the specific World wide web Heritage Sourcebooks Project began seeing your way to be able to admittance scrolls that have been already for sale having to do with the Word wide web, the item today includes plenty with text messaging crafted for sale locally. People today acquire payment caractere instantly and also gain from the familiar procedure for applying their very own financial information. Our support team can assist you through the ordering process, take details of any additional requirements you may have, and naturally, answer any questions you have about us and our goods and solutions. Proximity can play a huge part in relationships. Gender and power are closely tied in Macbeth, and they're able to be examined from a range of perspectives. Authority is legitimate once the man or woman who's the field of influence believes that is right and proper for a different individual t o exert influence or try to exert it. It happens when the man or woman making requests dependent on the position or authority held. Ideas, Formulas and Shortcuts for Essay Topics about Power The progress of human beings or any nation is completely is dependent on the increase of knowledge in numerous fields in the beneficial and constructive ways. Thus, it's the best choice to purchase from the stores immediately. More importantly than what made America the most effective nation in the world is why it became the most effective country. The countries natural resources and its location would aid in improving the ability of the United States of america and also boost the stream of money. Whenever you have submitted a guide, you ought to expect an acknowledgement but this might free paper writing service of concern regarding unintentional plagiarism. Nuclear power is a popular topic, which makes it a wonderful option if you want to compose an argumentative essay. Citations and extracts from assorted sources have to be formatted properly. Academically suitable compare contrast essay topics ought to be stimulating together with attention-grabbing. There are just a few things that define whether an essay you're working on is going to be a good one. By browsing compare and contrast essay examples, an individual can observe that a normal assignment is made up of 3 sections that have an introduction, discussion of your principal notion, the particular issues to study. You are not just accountable for what you say, but also for what you don't say Martin Luther There are lots of other excellent quotations that could act as a fantastic beginning for your essay on responsibility and supply excellent tips for writing. Some great postmodern theory can be useful. Well, power is thought to be the ability or capability to act or perform effectively. As a result of that, coercive power is often employed by the best level to direct control the decreased ones. It is simply the opposite of reward power. All have been possible because of the ability of knowledge. Likewise the followers will also be in a position to use coercive ability to influence the behavior of the leaders. Reward power requires the ability to influence different people owing to an individual's control over desired resources. The more power that someone has, the more corrupt they get. Consider the ability of a single person over the other.

Why You Shouldnt Mix Bleach and Vinegar

Mixing bleach and vinegar is a bad idea. Toxic chlorine gas is released, which essentially serves as a way to wage chemical warfare on ones self. Many people mix bleach and vinegar, knowing its dangerous, but either underestimate the risk or else hope for increased cleaning power. Heres what you should know about mixing bleach and vinegar, before trying it. Why People Mix Bleach and Vinegar If mixing bleach and vinegar releases toxic chlorine gas, then why do people do it? There are two answers to this question. The first answer is that vinegar lowers the pH of bleach, making it a better disinfectant. The second answer to why people mix bleach and vinegar is that people dont recognize how dangerous it is or how quickly it reacts. They hear mixing the chemicals makes them better cleaners and disinfectants, but dont realize the cleaning boost isnt going to make enough of a difference to justify the considerable health hazard. What Happens When Bleach and Vinegar Are Mixed Chlorine bleach contains sodium hypochlorite or NaOCl. Because bleach is sodium hypochlorite in water, the sodium hypochlorite in bleach actually exists as hypochlorous acid: NaOCl H2O ↔ HOCl Na OH- Hypochlorous acid is a strong oxidizer. This is what makes it so good at bleaching and disinfection. If you mix bleach with an acid, chlorine gas will be produced. For example, mixing  bleach with toilet bowl cleaner, which contains hydrochloric acid, yields chlorine gas: HOCl HCl ↔ H2O Cl2 Although pure chlorine gas is greenish-yellow, gas produced by mixing chemicals is diluted in air. Its invisible, so the only way to know about it is by the smell and negative effects.  Chlorine gas attacks mucous membranes, such as eyes, throat, and lungs and can be deadly. Mixing bleach with another acid, such as the acetic acid found in vinegar, yields essentially the same result: 2HOCl 2HAc ↔ Cl2 2H2O 2Ac- (Ac : CH3COO) There is an equilibrium between the chlorine species that is influenced by pH. When the pH is lowered, as by adding toilet bowl cleaner or vinegar, the ratio of chlorine gas in increased. When the pH is raised, the ratio of hypochlorite ion is increased. Hypochlorite ion is a less efficient oxidizer than hypochlorous acid, so some people will intentionally lower the pH of bleach to increase the oxidizing power of the chemical, even though chlorine gas is produced as a result. What You Should Do Instead Dont poison yourself! Rather than increasing the activity of the bleach by adding vinegar to it, its safer and more effective to simply purchase fresh bleach.  Chlorine bleach has a shelf life, so it loses power over time. This is particularly true if the container of bleach has been stored for several months. Its far safer to use fresh bleach than to risk poisoning  by mixing bleach with another chemical. It is fine to use bleach and vinegar separately for cleaning as long as the surface is rinsed between products.